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Using Land Trusts for Real Estate (Taking a New Look) - YouTube
Channel: Clint Coons Esq. | Real Estate Asset Protection
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- Hey guys, Clint Coons here.
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And in this video,
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I wanna take a new look
at using land trust
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for investing in real estate.
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Okay, let's get started.
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(upbeat music)
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All right, so here's the deal.
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If you watched the video
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that I cut on the do on sale clause,
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or you saw that other video
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I did with the attorney from Texas
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who works with underwriters
to put loans together,
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one of the things really struck me
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about the use of land trust
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and how they might be utilized now
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from a different standpoint.
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And many times you've
heard me talk about it,
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you've heard a lot of people
talk about using land trust
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for that due on sale clause.
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And as I showed you my
due on sale clause video,
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that, you know, Freddie
Fannie conforming loans
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which 90% of them are out
there, it's not an issue, right?
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If you take title to property
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that's an investment property,
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you got an investment loan
on a conventional loan on it,
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you can move it into an LLC
and they won't accelerate.
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So that idea of using a land trust
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to get around the acceleration clause,
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not so much of a problem.
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Now, maybe there may be still limited uses
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that you could see
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if you're concerned about buying
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possibly a subject two deal
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or something like that,
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where you think that trust
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would probably offer a
little more protection
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and I don't know if it would.
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I mean an LLC since it's
permitted to transfer it in,
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maybe an LLC is the better way to go
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if you have an anonymity
compliance structure.
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In fact, there's an
idea for another video.
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But here's what I'm thinking.
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So, as I was talking to
Andy, something struck me.
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One of the things that we do know
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with limited liability companies
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and Freddy Fannie
conforming loans is that,
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you can deed the property in,
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but if you want to refi,
what do you need to do?
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You need to take it out.
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So here's what can happen.
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You build a structure like this.
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We create LLCs here,
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okay, we got some LLC set
up, let's just do three.
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And you've worked really hard
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to create this structure that
provides anonymity for you.
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So here's your Wyoming, LLC down here,
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and each of these LLCs are
owned by the Wyoming LLC.
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Okay, I've covered this hundreds of times.
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Now, when I've got a property
in this LLC right here,
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LLC number one, all right,
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LLC number one has this house
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and I want to do a refi on it.
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What do I have to do?
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I need to pull that property
out and put it in my own name
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because it's gonna be a
Freddie Fannie conforming loan.
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If I'm not working with
a portfolio lender,
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they're not gonna allow
me to refi this property
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in that limited liability company.
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I mean, check out the
above videos I've cut
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where I discussed this issue.
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So you have to pull it out.
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Now, what do you see there?
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You see that it was held in an LLC
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that your name wasn't
attached to, all right?
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And then it comes out of that
LLC to your individual name,
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got it, remember in one of my videos
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I talk about anonymity,
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how to blow your anonymity with LLCs,
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how you can screw it up.
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So here we go, we get a
property transferred out
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into your own name,
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and then you turn around
after the refi is complete,
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and you put it back into that LLC.
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So if someone was looking,
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you would see is that you
originally bought the property
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because you did a standard
Freddie Fannie conforming loan,
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so it was in your name.
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So it went from you,
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the LLC that doesn't have
your name attached to it.
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So someone could possibly
assume you still own it,
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but you really don't know that
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because you're not on that LLC.
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And then it went from this LLC to you
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and then you back to the LLC.
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All right.
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So there are plenty of people out there
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that if they saw that,
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I mean, I know I'd look at and go,
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"The hell, I know what's up.
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Guy has a structure.
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He's working with Anderson
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and they put together
an anonymity plan him."
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So this is the take on the land trust
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that I hadn't considered before,
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that I want you to think about.
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So one of the things that
I've always thought of
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when I'm putting my structures together
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is to use the kiss principle.
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And you may look at some of my drawings
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and go, "Clint you don't
even know what a kiss is."
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But, believe me, I do try to adopt that.
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I mean, there has to be a real reason
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why putting enemy together,
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you have to say, well,
you justify its existence.
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What is it going to do for me?
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Now putting property into these LLCs,
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if you're just trying to
avoid the due on sale clause,
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that is not an issue,
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that to me isn't a big enough
reason to use a land trust.
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I like to use land trust
in my own investing
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wherever there's an issue
with property transfers.
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If I can't go directly in the LLC,
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and they're gonna tax me on it,
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then I'll use the land
trust in those situations.
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But now this brings up a new strategy.
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So if I know that I'm
using the bar strategy
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or I'm gonna wanna refi
this property in the future
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and I wanna maintain that anonymity,
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I don't wanna have to dismantle
it and file multiple deeds,
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then here's what you
should consider doing.
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Set up structure,
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but include a land trust
with each LLC, like this.
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So the land trust is
owned 100% by the LLC,
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it's like that.
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This is my land trust.
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Now on that initial transfer,
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rather than put it directly
into the LLC like I did here,
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instead I would put it into
my land trust, just like this,
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drop it into the land trust.
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And so now it's held in the trust.
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So when you go to refi the property,
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and what's gonna happen is,
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you're gonna attempt to do the refi
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directly in the trust name.
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Now you're not gonna have to pull it out,
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so property won't be transferred out,
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so there won't be a recording
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of the fact that property went in
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and came back out to you personally,
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you're gonna be doing it directly
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through that trust name itself.
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So you keep that anonymity shield intact.
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And people aren't gonna know
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that you have all these business entities
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and be able to track down
your other properties.
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Maybe they can see the one, all right?
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Some reason maybe this gives
it away some way somehow
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but they're not gonna be able
to tie all back together.
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So thinking about that way,
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this is how you may wanna
consider using the land trust.
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Consider putting the land
trust in your structure
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to keep that that all tight
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without seeing multiple
property transfers.
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Now, here's the thing.
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This is important.
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If you're going to do this strategy
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and I'm thinking, you know,
reconsider it for myself
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for some of those properties
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that I've been acquiring
that are residential,
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that I get loans on
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rather than going directly
in the LLC using this,
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when you're ready to refi property,
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there's an important step here,
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unless you're in Florida or Illinois.
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You're gonna need to take this trust
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and you need to restate the trust,
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restate the trust as a living trust, okay?
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What does that mean?
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I've done this many times for people,
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where I take their land trust
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'cause I know what the lender is gonna do.
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The attorney's gonna, just like Andy,
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they're gonna look at the trust,
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it's a land trust,
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"I Don't understand it, won't do it."
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But if it's a living trust,
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something that is
adopted in all 50 states,
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recognized by all 50 states.
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And that's not to apply land
trusts aren't recognized,
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they're just not recognized by statute,
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the living trust is more common,
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that's a better way to describe it.
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So they've seen that before,
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in that instance then
with the living trust,
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if this comes to their desk,
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and you've restated it to
look like a living trust,
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which means you draft a new operating,
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a new trust agreement that
reads just like a living trust.
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I have a short form that I like to use,
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it's about 15 to 20 pages long.
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And we send that to the lender.
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First, we try to send
them a certification.
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If they accept a certification
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which is another important
document you should have,
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and all the certification
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is it gives them all the information,
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who is the trustee?
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Who are the beneficiaries?
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Who is the grantor of the trust?
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And you send that in.
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They won't accept that,
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they want to see a copy of the trust.
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And you send them a trust that
looks like a living trust,
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so they can then use that
for lending purposes.
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Now you're able to do the
refi in the trust name.
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Once that's done, then you need to go back
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and restate trust again,
back to a land trust.
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And if you're scratching your head
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wondering how does this take place?
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Well, the beauty of trust
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is that trust can be restated at any time.
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When I say restated,
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what it means legally is that,
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you can change the entire trust
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to anything you want it to be.
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This is not an irrevocable trust,
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they can be changed at all times.
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They can go land trust, living trust,
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a living trust, land trust, land trust,
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who knows what trust
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as long as it's not irrevocable trust,
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you've got a ton of flexibility there.
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So by these changes,
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you can keep a structure in place
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where you're not having
to pull a property out
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and do the refis in the name of it.
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I thought it was interesting concept
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after talking to Andy and I
wanted to share this with you.
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If you haven't seen that video,
definitely check that out,
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I'll put a link to it at
the end of this video,
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it'll be popping up right now
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to go back and listen
to my interview of him.
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But it's a strategy,
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you may wanna consider it
when it comes to taking title
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to your investments in the future.
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Take care everyone.
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(upbeat music)
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